Just read the profiteering by HDB in its sale of flats to
citizens as exposed in a letter to the forum page of the Straits
Times (see below)
FROM the letter by the Housing Board's Ms Kee Lay Cheng ('How
prices of new HDB flats arrived at'; ST, Nov 17), it would appear
that new flats that are sold are not subsidised. Ms Kee said that
'new HDB flats are... priced below their equivalent market values
so that buyers enjoy a substantial market subsidy' - that is, they
are sold at prices lower than those sold in the open market.
In fact, there is no such thing as 'market subsidy'. If a flat's
price in the open market is $400,000 and the seller reduces it to,
say, $350,000, he is giving a discount and not a subsidy. Likewise,
if the HDB sells its flats at $350,000 each, it is giving a
discount to what similar flats can fetch in the open market.
A subsidy is the difference between the cost of a product or
service and the reduced price at which the product or service is
sold or provided, the difference being absorbed by the Government
to make the product or service available to those who may not
otherwise be able to afford it.
Thus, if it costs $200,000 to build each flat (land cost +
construction cost + consultants' fees and other incidentals) and
they are sold at $150,000, then the HDB is giving a subsidy of
$50,000. On the other hand, if it sells the flats at, say,
$350,000, it is in fact making a profit of $150,000, even though it
may be giving a discount of $50,000 to the market price.
The flats in Queenstown that are close to the MRT station were
constructed after demolishing low- and medium-rise blocks that were
constructed during the early 1960s. The land on which they stood
was acquired at very low cost. Even allowing for inflation, the
final costs of the flats cannot be the prices now quoted by the
HDB. At these prices, the flats are not subsidised.
To say they are sold at these prices because they are near the MRT
station is to place a value on them and not their cost. It would
have been far better had the HDB said that, because the flats are
located close to amenities, they will not be subsidised, but will
be sold at cost or even at a small profit to subsidise flats that
are not so well located.
Cheong Chee Mun
